Quick Answer: When an Israeli business is sold or transferred as a going concern, Section 30 of the Severance Pay Law 5723-1963 (Chok HaPitzuim) requires the buyer to absorb existing employees and recognize their full seniority. An employee who is not offered continuity on substantially the same terms is entitled to full severance from the seller, as if dismissed. In a pure share acquisition — where the corporate entity stays the same — employment relationships continue automatically and Section 30 does not need to be invoked. Foreign workers, B/1 visa holders, and expat employees have the same statutory protections as Israeli citizens.

Israel's M&A market processes hundreds of business transfers a year: multinational tech acquisitions, sales of family-owned manufacturing plants, retail chain deals. A workforce is involved in every case, and Israeli labor law sets clear rules about what the buyer owes those workers, what the seller owes anyone not retained, and what choices the employees themselves can make.

Most foreign buyers and foreign employees are surprised by how strong the Israeli statutory framework is. Section 30 draws a simple line: if the business moves to a new owner, the workers move with it on their existing terms. Whatever the parties write in the sale agreement does not override what the statute provides.

For foreign nationals working in Israeli companies, particularly in tech where acquisitions happen regularly, these rules determine whether accumulated seniority survives the deal intact or gets quietly reset by a poorly structured transaction.

1. What Counts as a Business Transfer Under Israeli Law

Section 30 of the Severance Pay Law 5723-1963 uses the phrase "transfer of an enterprise" (ha'avarat ma'asak). Israeli courts and the National Labor Court have interpreted this broadly. A business transfer occurs when the essential functions and operational capacity of the enterprise pass from one owner to another — not just individual assets or property.

The legal test looks at whether a working economic unit has moved: Does the buyer get the customer relationships? The operational systems? The workforce? The goodwill? The brand? The greater the overlap between what the seller had and what the buyer now has, the stronger the inference that a going-concern transfer has occurred.

Transfers courts have recognized as triggering Section 30 include:

  • Sale of a restaurant as an operating business, including lease, equipment, suppliers, and staff
  • Transfer of a manufacturing operation from one corporation to a subsidiary of the buyer
  • Outsourcing of a business function where the contractor takes on the same workers performing the same tasks
  • Purchase of a software development studio's assets including its development team and intellectual property
  • Transfer of a retail chain's stores, including inventory, systems, and store-level employees

Transactions courts have not treated as going-concern transfers include: a buyer purchasing only the equipment of an insolvent company without the workforce; a landlord re-letting a commercial space that had housed a prior business; and an asset sale limited to intellectual property with no transfer of operations or staff.

In Practice — What the National Labor Court Looks For: In a 2025 National Labor Court decision involving the transfer of a catering concession at a Tel Aviv venue, the court applied a seven-factor going-concern test: transfer of customer base, continuity of management, overlap in staff, use of same operational systems, physical relocation or retention of premises, continuity of brand, and the interval between operations. Because the new concessionaire took over immediately using the same kitchen staff, the same supplier relationships, and the same operational procedures, the court held that a Section 30 transfer had occurred. The fact that the new concessionaire had formally "recruited" the staff (rather than absorbing them) did not avoid the continuity obligation — the National Labor Court made clear that employers cannot avoid Section 30 by conducting a nominal re-hiring exercise.

2. Section 30: The Core Continuity Rule

Section 30 of the Severance Pay Law 5723-1963 provides that where an enterprise is transferred from one employer to another, and the employees continue to be employed in that enterprise after the transfer, the period of service with the transferring employer is added to the period of service with the receiving employer for the purpose of calculating severance entitlement.

In plain terms: the buyer inherits the employees' seniority. An employee who worked seven years for the seller and then continues with the buyer for another three years has ten years of seniority for severance calculation purposes. The buyer cannot reset the clock to zero on the transfer date.

The practical effect is significant. A senior employee who has worked a decade for a company earns a severance entitlement of ten months' salary. If the buyer refuses to recognize that seniority and later dismisses the employee, the Regional Labor Court will calculate severance on the full combined tenure, and the gap between what the buyer acknowledges and what the court finds due becomes the buyer's liability.

Section 30 also provides that where the transferring employer and the receiving employer agree that the receiving employer will be responsible for the entire accumulated severance liability, and the employee is given notice of and agrees to this arrangement, the seller is released from its severance obligation. This is the mechanism behind the indemnity clauses in most Israeli M&A employment schedules: the buyer formally assumes the accumulated severance liability, the employee is informed, and the seller's obligation passes to the buyer.

In Practice — Section 30 Seniority Calculation: A logistics company was acquired in March 2026 by a European freight group through an asset purchase. The acquired company had 34 employees, the most senior of whom had worked there for 11 years at a last monthly salary of NIS 24,000. Under the sale agreement, the buyer assumed all employment obligations and the employees were given written notice that their seniority was recognised from their original start dates. Two years later (in 2028), the buyer decided to close the Israeli division and dismissed all staff. The 11-year employee's severance calculation: 11 original years + 2 years with the buyer = 13 years × NIS 24,000 (salary at dismissal time, now NIS 28,000 after raises) = NIS 364,000. This entire amount was the buyer's obligation under the Section 30 assumption clause. The buyer's failure to reserve for this liability in the acquisition budget was an error in employment due diligence.

3. Asset Sale vs. Share Sale: A Fundamental Distinction

The single most important variable in determining which employment rules apply is whether the deal is structured as an asset purchase or a share purchase.

Asset purchase: Section 30 applies

When the buyer purchases the business assets — equipment, contracts, IP, inventory, customer relationships — the employing legal entity changes. The seller's company no longer operates; the buyer's entity takes over. This change of employer is precisely what Section 30 addresses. The buyer must decide which employees to absorb, inform them of the transfer, recognize their seniority, and notify the seller of who is being retained so the seller can settle with those not absorbed.

The buyer's employment obligations attach at the moment the business transfer becomes effective. From that date, the buyer owns the seller's employment obligations: the Wage Protection Law 5718-1958, the Annual Rest Law 5711-1951, pension contribution obligations, any collective agreements binding the seller's workforce, and all accumulated entitlements not yet paid out.

Share purchase: continuity by operation of law

When the buyer purchases the seller's shares, the corporate entity does not change. The same legal person that employed the workers before the deal continues to employ them after. For employment law purposes, nothing has happened. The workers retain all their accumulated seniority automatically, without any specific action required by either party, and Section 30 does not need to be invoked because the legal employer is unchanged.

This makes share deals simpler from an employment perspective but puts all the employment liability risk on the buyer. In a share deal, the buyer inherits every employment claim accruing inside the company before closing: underpaid wages, pension arrears, unresolved labor court claims, improperly structured Section 14 arrangements. Pre-closing employment due diligence is how the buyer finds out what it is actually paying for.

In Practice — Share Deal Inherited Liability: A Canadian private equity firm acquired 100% of the shares of an Israeli food-tech company in January 2026 for USD 12 million. Post-closing due diligence revealed that the company had classified 14 workers as independent contractors (*otzma'im*) rather than employees for the previous four years, had not made pension contributions for them, and had not paid vacation or sick leave. Under the Employee vs. Independent Contractor test applied by Israel's Regional Labor Courts, all 14 were likely employees in law. The reclassification liability — back pension contributions to Bituach Leumi (NII), pension fund contributions, accrued vacation, and sick leave — was estimated at approximately NIS 3.2 million. This liability was inside the acquired entity and fully inherited by the buyer. A thorough pre-closing employment audit costing roughly NIS 80,000 in legal fees would have identified this risk and enabled a purchase price adjustment.

4. What the Employee Can Do When the Business is Transferred

An employee is not a passive object in a business transfer. Israeli law gives employees specific choices at the point of transfer, and exercising those choices correctly — at the right time and with the right documentation — determines what they receive.

Option 1: Continue with the buyer on the same terms

If the buyer offers continued employment on materially the same terms (same salary, same role, same location, same benefits), and the employee accepts, they transition to the new employer with their full seniority intact under Section 30. No severance is paid at this point because employment has not terminated. The clock simply keeps running.

Option 2: Refuse the transfer and claim severance

An employee who has good reason to refuse the transfer can decline it. Good reasons include a financially precarious buyer, materially inferior employment terms, or a substantial change to the work itself. An employee who refuses on justified grounds gets full severance from the seller, calculated on their total years of service.

The National Labor Court has been careful to limit this right to genuine refusals, not strategic ones. An employee who refuses transfer simply to get a severance windfall, when the buyer was offering the same terms, may find the Regional Labor Court treating the refusal as a voluntary resignation rather than a justified one — with the same result as any other resignation: no severance, or reduced severance.

Option 3: Accept the transfer and later resign under Section 11(a)

An employee who accepts the transfer but then finds the new employer substantially changing their conditions has a constructive dismissal claim under Section 11(a) of the Severance Pay Law. Courts give that claim extra traction when the deterioration follows a business transfer and happens within about 12 months of the deal closing, because accepting the initial offer cannot be read as consenting to whatever comes next.

In Practice — Justified Refusal of Transfer: An accountant with 9 years' seniority at a Tel Aviv printing company learned in February 2026 that the company was being sold to a startup with no credit history, operating for only 18 months, and currently loss-making. The buyer offered him continued employment at his existing salary. He consulted an employment lawyer, who reviewed the buyer's financial statements and identified genuine viability risk. The accountant submitted a written refusal of the transfer, citing his reasonable apprehension about job security with a financially fragile acquirer and requesting full severance from the seller under Section 30. The seller, eager to close the deal quickly, agreed to pay his severance of 9 months × NIS 18,000 = NIS 162,000, plus notice pay of NIS 18,000 and accrued leave of NIS 14,400. The total payout was NIS 194,400. The accountant was free to seek other employment immediately.

5. Pension Contributions and Section 14 Arrangements on Transfer

Most Israeli employees hired since 2008 are covered by the Comprehensive Pension Order (Tzav Harhavat Pension) which mandates minimum pension contributions from both employer and employee. For employees hired before 2008 with older employment arrangements, the rules are more complex, but the principle is the same: the pension obligations follow the employee.

Under a Section 14 arrangement (*hesder sif 14*), the employer's ongoing pension contributions discharge the severance obligation rather than the employer accumulating a separate severance debt. Once a valid Section 14 arrangement is running, the accumulated pension balance belongs to the employee and cannot be clawed back regardless of what happens to the employer.

On a business transfer, the Section 14 arrangement should continue uninterrupted with the new employer. In practice, this requires three steps:

  • The buyer must maintain pension contributions at the same rate (or higher) to the same pension fund (or a fund of the employee's choosing under the Pension Law 2008)
  • The buyer must execute a new Section 14 declaration confirming that the arrangement continues from the original start date
  • The employee must receive written confirmation that the accumulated pension balance — representing the historical severance liability — is recognized and not subject to any reset

Where the seller operated a classic *pitzuim* model (maintaining a severance reserve or provident fund rather than a Section 14 arrangement), the obligation to fund that reserve transfers to the buyer under Section 30. Buyers who are not aware of this often fail to request the transfer of the pitzuim fund as part of the closing conditions, leaving an unfunded liability on their balance sheet from day one.

In Practice — Section 14 Continuity on Acquisition: A US-based software company acquired an Israeli development studio through an asset deal in April 2026. The studio had 22 employees, all under Section 14 arrangements with Meitav Dash pension fund. The acquisition agreement specified that the buyer assumed all employment obligations and that Section 14 arrangements were to continue without interruption. At closing, the buyer's Israeli legal counsel prepared new Section 14 declarations for each employee, confirmed the transfer of employer-side contributions to the Meitav Dash policy, and issued each employee a written notice stating their seniority start date and confirming that their accumulated pension balance (representing their severance entitlement) was unaffected by the transfer. This 90-minute administrative exercise, costing approximately NIS 5,000 in legal time, prevented future disputes about seniority recognition. Three employees whose Section 14 declarations were inadvertently missed spent 14 months in correspondence before the oversight was corrected.

6. Special Protections That Complicate Workforce Decisions on Transfer

Both the seller deciding who not to offer continuity and the buyer deciding who to dismiss post-transfer must be aware that Israeli law gives certain employees heightened protection against dismissal. Dismissing a protected employee in the context of a business transfer requires either their written consent or a specific permit from the relevant authority — and missing this step turns a routine workforce decision into a costly legal violation.

The main protected categories are:

  • Pregnant employees and those on maternity leave: Under the Employment of Women Law 5714-1954, dismissing a pregnant employee or one who has returned from maternity leave within 60 days requires the prior written consent of the Minister of Economy and Industry. This protection runs for 60 days after the employee returns from leave. An asset buyer who "does not offer continuity" to a pregnant worker has effectively dismissed her and requires the ministerial permit.
  • Employees on reserve military duty (miluim): The Defense Service Law 5746-1986 prohibits dismissing an employee during reserve duty or within 30 days of their return. A business transfer that closes while an employee is on miluim does not permit the seller to exclude that employee from the transfer offer without the required protections.
  • Employees with disabilities: The Equal Rights for People with Disabilities Law 5758-1998 prohibits dismissal motivated by the disability. Any workforce reduction on transfer that disproportionately removes disabled employees invites a discrimination claim.
  • Senior employees approaching protected retirement age: Courts have looked skeptically at business transfers that result in the dismissal of employees within a few years of the standard retirement age of 67 for men and 65 for women.
In Practice — Protected Employee on Transfer: A retail chain transfer in December 2025 resulted in the buyer absorbing 40 of 47 store employees. Among the seven not offered continuity was a store supervisor who was six months pregnant. The buyer's transaction counsel did not flag the pregnancy protection under the Employment of Women Law 5714-1954. The supervisor filed at the Regional Labor Court in Tel Aviv. The court found that excluding her from the transfer offer was functionally a dismissal of a pregnant employee without ministerial consent, in violation of Section 9A of the Employment of Women Law. The court ordered the buyer to reinstate her (or pay compensation equivalent to her wages through the end of maternity leave), awarded full severance from the seller for the excluded-from-transfer portion, and imposed an additional fine under the Employment of Women Law for the unlawful dismissal. Total exposure: approximately NIS 140,000.

7. What Foreign Investors Need to Know Before Buying an Israeli Business

Foreign buyers — whether private equity firms, strategic acquirers, or individual entrepreneurs — frequently enter Israeli business transactions without a clear picture of the employment obligations they are inheriting. The following due diligence items are non-negotiable before any Israeli asset acquisition.

Employment due diligence checklist

  • Employee schedule: Full list of all employees (and contractors who may be reclassified), with their legal start date, last salary, role, visa/work permit status, and Section 14 coverage.
  • Contractor reclassification risk: Ask the seller to confirm that all independent contractors satisfy the multi-factor test applied by the Regional Labor Courts. If they do not, the buyer inherits the reclassification liability.
  • Pension fund status: Obtain confirmation from the pension fund administrator (Clal, Meitav Dash, Harel, Phoenix, or similar) of the current balance and that contributions are current. Missing contributions are a liability the buyer assumes.
  • Accrued leave balances: Request leave balance statements for all employees. These are paid-out obligations on dismissal and must appear in the working capital adjustment.
  • Protected employees: Identify pregnancies, employees on miluim, disability-related protections, and employees close to retirement age before finalizing the workforce plan.
  • Collective agreements: If any part of the workforce is covered by a Collective Wage Agreement (heskem kibutzi) or an Extension Order (tzav harchava), confirm which obligations are binding and whether the buyer will be a party to them post-transfer.
  • Labor court claims: Request a litigation schedule. Pending Regional Labor Court claims are potential liabilities that survive the transfer in a share deal and may transfer to the buyer in certain asset deal structures.
In Practice — Foreign Buyer Employment Due Diligence: A German industrial group acquired an Israeli precision-parts manufacturer through an asset deal in March 2026. Their Israeli employment counsel conducted a two-week pre-closing audit covering all 61 employees. The audit found: (1) three workers classified as contractors who had worked exclusively for the company for over 5 years, creating a reclassification exposure of approximately NIS 480,000 in back contributions and vacation; (2) a collective agreement with the Histadrut (HaHistadrut HaKlalit) covering the production floor that required a 45-day notice period to employees on transfer; (3) one employee on extended medical leave whose dismissal without a prior Execution Office waiver carried legal risk; and (4) aggregate accrued leave balances of NIS 720,000 not reflected in the seller's working capital. The findings enabled a purchase price reduction of approximately NIS 1.2 million. The due diligence cost NIS 35,000 in legal fees.

8. Acqui-Hires in Israel's Tech Sector: Special Considerations

Israel's technology ecosystem generates a high volume of what the industry calls "acqui-hires": transactions where the buyer is really buying the team, not the product or the revenue. The acquired company dissolves, and the employees are offered positions at the acquirer.

An acqui-hire structured as an asset purchase triggers Section 30. The team members transfer to a new employer with their accumulated seniority intact. In practice, most acqui-hires are structured so the employees sign new employment agreements with the acquirer on day one. If those agreements include a "seniority reset" clause — stating that seniority runs from the new agreement date — that clause is void to the extent it cuts the statutory severance entitlement the employee built up before the deal. The National Labor Court has been clear: statutory rights cannot be contractually waived to the employee's detriment.

A Section 14 arrangement in an acqui-hire context creates an important distinction. If the acquired company's employees had valid Section 14 arrangements, their accumulated pension balance is already their property regardless of what the acquiring company does. The Section 14 funds will not be forfeited even if the acquirer structures the deal as a termination followed by a new hire with fresh seniority. The Section 14 balance remains, and the new employment simply starts a new accumulation period. The employee ends up with two pension pools: the legacy Section 14 fund (owned outright) and a new accumulating fund with the acquirer.

Employees in acqui-hire situations should always:

  • Request written confirmation from the acquirer of the seniority date to be used for future severance calculations
  • Obtain written confirmation that the Section 14 arrangement (or equivalent) continues from their original start date
  • Have the new employment agreement reviewed by an Israeli employment lawyer before signing, specifically to identify any clause that purports to reset seniority, waive accumulated entitlements, or exclude Israeli statutory rights
  • Understand the vesting schedule for any equity grants offered by the acquirer, which is separate from the statutory employment rights question
In Practice — Acqui-Hire Seniority Dispute: A Nasdaq-listed US technology company acqui-hired a 9-person Israeli AI team in June 2026 through an asset purchase. Each team member was asked to sign a new Israeli employment agreement stating a commencement date of June 1, 2026. The agreements were silent on prior seniority. Three of the nine team members had been employed by the acquired startup for between 4 and 7 years. When one of those three employees was made redundant 14 months after the acqui-hire (in August 2027), the company calculated her severance based on 14 months with the US company, for a total of approximately NIS 33,000. She filed at the Regional Labor Court, arguing that her 6-year pre-acquisition seniority survived under Section 30. The court agreed. Her severance was recalculated on 7 years and 2 months at her current salary of NIS 32,000 — a total of NIS 229,333. The company's failure to recognize prior seniority in the acqui-hire documentation cost it an additional NIS 196,000 beyond what it had provisioned.

Frequently Asked Questions

Under Section 30 of the Severance Pay Law 5723-1963, when a business is transferred as a going concern, the buyer inherits the seller's obligations to existing employees. The buyer is not legally required to offer employment to every worker, but an employee who is not offered continuity is entitled to full severance from the seller as if dismissed. In practice, most acquirers absorb the workforce because dismissing everyone triggers an immediate severance liability that the seller must fund before closing.
Yes. If the buyer does not offer you employment on materially the same terms, you are entitled to full severance from the seller under Section 30 of the Severance Pay Law 5723-1963 — one month of last salary per year of service. If the buyer offers employment but substantially changes your conditions within the first 12 months after the transfer, you may have a constructive dismissal claim under Section 11(a) of the same law. Always consult an Israeli employment lawyer before signing any transfer documents or accepting a new employment agreement with the acquirer.
A Section 14 arrangement is tied to the employee, not the employer. The accumulated funds in the pension fund remain yours regardless of the business transfer. The new employer must continue the arrangement and issue a new Section 14 declaration confirming that seniority runs from your original start date. If the new employer changes the pension terms or resets the Section 14 arrangement, the transition document should specify how legacy contributions are treated. Always request a written confirmation from the new employer and the pension fund administrator that your accumulated balance is intact and that the Section 14 arrangement continues.
No. Section 30 applies only to a transfer of business assets, where the employing legal entity changes. In a share acquisition, the corporate entity stays the same, so employment relationships continue unchanged by operation of law without invoking Section 30. Employees in a share deal retain all accumulated rights automatically. However, the buyer in a share deal inherits all employment liabilities inside the acquired company — including underpaid wages, pension arrears, contractor reclassification risk, and any pending labor court claims — making pre-closing employment due diligence critical.
In an asset purchase, you take over the seller's workforce obligations under Section 30 of the Severance Pay Law 5723-1963. Each employee you absorb retains their full seniority. Employees you do not absorb are entitled to full severance from the seller. Before closing, conduct employment due diligence covering each employee's start date, salary, Section 14 status, accrued leave, contractor classification risk, protected employee status, and any pending labor court claims. Failing to identify these obligations before signing does not eliminate them — the courts will find them after closing and impose them on you regardless of what the sale agreement says.

Related Guides

Severance Pay in Israel for Foreign Workers Constructive Dismissal in Israel: When You Can Claim Severance After Resigning Employment Law in Israel for Foreign Nationals Section 14 Severance Arrangement in Israel Wrongful Termination in Israel: Rights and Remedies
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Adv. Eli Shimony

Licensed Israeli Attorney

Adv. Eli Shimony advises employees and employers on Israeli labour law, including business transfers, severance disputes, acqui-hire transactions, and the employment rights of foreign nationals working in Israel.

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